Correlation Between MI Homes and Zhongsheng Group

Can any of the company-specific risk be diversified away by investing in both MI Homes and Zhongsheng Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MI Homes and Zhongsheng Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MI Homes and Zhongsheng Group Holdings, you can compare the effects of market volatilities on MI Homes and Zhongsheng Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MI Homes with a short position of Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and Zhongsheng Group.

Diversification Opportunities for MI Homes and Zhongsheng Group

0.16

Correlation Coefficient

MI Homes  Zhongsheng Group

Average diversification

The 3 months correlation between 4MI and Zhongsheng is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings and MI Homes is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MI Homes are associated (or correlated) with Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of MI Homes i.e., MI Homes and Zhongsheng Group go up and down completely randomly.

Pair Corralation between MI Homes and Zhongsheng Group

Assuming the 90 days horizon MI Homes is expected to generate 0.78 times more return on investment than Zhongsheng Group. However, MI Homes is 1.28 times less risky than Zhongsheng Group. It trades about -0.49 of its potential returns per unit of risk. Zhongsheng Group Holdings is currently generating about -0.41 per unit of risk. If you would invest  15,330  in MI Homes on October 6, 2024 and sell it today you would lose (2,345) from holding MI Homes or give up 15.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MI Homes  vs.  Zhongsheng Group Holdings

MI Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Zhongsheng Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhongsheng Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Zhongsheng Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MI Homes and Zhongsheng Group

The main advantage of trading using opposite MI Homes and Zhongsheng Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, Zhongsheng Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Zhongsheng Group will offset losses from the drop in Zhongsheng Group's long position.

The idea behind MI Homes and Zhongsheng Group Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.